The Wall Street Journal reports today on Royal Bank of Canada’s compliance issues in Latin America, leading to its eventual decision to pull out of the region. RBC’s Latin America operations were run out of a Miami office.
The article centers around Gilberto Miranda Batista, a former Brazilian Senator who amassed a $500 million fortune helping companies obtain permits in an Amazon city. Interestingly, the article states that compliance officers at RBC initially recommended against the relationship not because of any specific concerns about Mr. Miranda’s source of funds, but rather because Mr. Miranda was a PEP (and, therefore, the regulatory scrutiny of his accounts would be greater). While the article could be read as suggesting that bankers who objected to this recommendation were ignoring compliance, there is a legitimate argument against wholesale de-risking, such as removing all PEP relationships.
Eventually, concerns with a trust associated with Mr. Miranda caused the bank to cease its relationship with him. The Office of the Comptroller of the Currency also had concerns with the trust.
The article is an interesting look into the battle between compliance and business, and between banks and regulators.